U.S. Stocks Gain as Selloff Fades in Internet, Small-Caps

April 28 (Bloomberg) -- U.S. stocks rose, with the Standard
& Poor’s 500 Index erasing an earlier slide, as Internet and
smaller companies pulled back from a selloff amid optimism over
merger activity.

Pfizer Inc. added 4.2 percent after proposing to buy
AstraZeneca Plc for about 58.8 billion pounds ($98.7 billion).
Microsoft Corp. and Apple Inc. rallied more than 2.4 percent,
leading gains among the largest technology companies. Bank of
America Corp. dropped 6.3 percent after suspending its planned
buybacks and dividend increase because of an error in its
capital planning.

The S&P 500 rose 0.3 percent to 1,869.43 at 4 p.m. in New
York, reversing an earlier loss of 0.7 percent. The Dow Jones
Industrial Average increased 87.28 points, or 0.5 percent, to
16,448.74. The Nasdaq Composite Index declined less than 0.1
percent after tumbling as much as 1.5 percent, and the Russell
2000 Index of smaller companies slid 0.5 percent. About 7.5
billion shares changed hands on U.S. exchanges, 9.3 percent
above the three-month average.

“It’s remarkable how volatile the market can be on an
intraday basis,” John Carey, a Boston-based fund manager at
Pioneer Investment Management Inc., which oversees $220 billion
worldwide, said by phone. “Most of the companies that have
reported so far have exceeded expectations and there’s M&A
that’s bubbling along and that could be causing some optimism,
with big deals and restructuring.”

U.S. equities began higher as large companies rallied on
optimism about merger activity. Stocks turned lower as the U.S.
and European Union imposed new sanctions on Russia, while
selling in Internet and small-cap stocks spread to the broader
market. Major indexes recovered in the afternoon, turning
positive during the final hour of trading.

Technology Selloff

The Nasdaq Composite declined 0.5 percent last week,
including a 1.8 percent tumble on April 25, as disappointing
results from Amazon.com Inc. triggered a selloff in technology
shares and tensions over Ukraine intensified. The technology-heavy gauge has fallen in four of the past five weeks amid
concern valuations have outpaced estimates for earnings growth.
Nasdaq companies trade at 34 times reported earnings, about
double the level of S&P 500 members.

The frequency of selloffs has increased even as technology
makers are forecast to post the second-fastest profit growth in
the S&P 500 this year and members of the Nasdaq 100 Index are
beating analyst estimates by almost 10 percent this earnings
season.

Microsoft, IBM

Increases among larger stocks helped push technology
companies in the S&P 500 higher as a group. Microsoft surged 2.4
percent to $40.87 and Apple climbed 3.9 percent to $594.09 to
extend its three-day rally to 13 percent, the most since 2009.
International Business Machines Corp. added 1.9 percent to
$193.14.

The Dow Jones Internet Index fell 1.9 percent, extending a
4.1 percent decline on April 25. The index has dropped 18
percent from a 13-year high on March 5. Only four of 41 members
in the gauge rose today. Yahoo! Inc. dropped 1.4 percent to
$33.99. Amazon slumped 2.4 percent to $296.58. Netflix tumbled
2.4 percent to $314.21.

A report by the National Association of Realtors showed
contracts to purchase previously owned U.S. homes climbed in
March by the most in almost three years, showing residential
real estate was starting to stabilize entering the spring
selling season. The pending home sales index rose 3.4 percent,
the first gain in nine months, after a 0.5 percent drop in
February that was smaller than initially reported.

Economic Data

A busy calendar this week will give investors more clues
about the strength of the economy and the pace of the Federal
Reserve’s stimulus program.

The government’s initial tally of first-quarter gross
domestic product on April 30 may show the slowest expansion in a
year. Federal Reserve policy makers, who on the same day
conclude their third meeting of the year, will probably reduce
the pace of assets purchases designed to stoke the economy.

Three rounds of monetary stimulus have helped fuel economic
growth, sending the S&P 500 surging as much as 180 percent from
its 2009 low.

Payroll growth probably accelerated in April as companies
remained upbeat about the economy’s prospects after a setback in
demand caused by snowstorms and colder temperatures earlier this
year. Employers added 215,000 workers, the most since November,
economists project a May 2 report from the Labor Department will
show.

Ukraine Crisis

Investors are also watching developments in Ukraine. The
Obama administration imposed sanctions on seven Russian
officials and 17 companies linked to Russian President Vladimir
Putin’s inner circle involved in banking, energy and
infrastructure.

The sanctions, announced by the White House today, are
being imposed in conjunction with the European Union, which said
today it is adding 15 names to its list of previously sanctioned
individuals.

The Chicago Board Options Exchange Volatility Index, a
gauge of options prices on the S&P 500, dropped 0.6 percent for
its first loss in four days. The gauge jumped 5.6 percent on
April 25.

Consumer-staples and phone companies had the biggest gains
among 10 groups in the S&P 500, climbing more than 1.1 percent.
Financial and raw-materials shares declined the most, dropping
at least 0.5 percent.

Pfizer, GE

Pfizer added 4.2 percent to $32.04. The world’s largest
drugmaker is still interested in a deal after AstraZeneca
spurned its earlier offer. Pfizer proposed buying the London-based company on Jan. 5 for 46.61 pounds a share in cash and
stock, and AstraZeneca declined to pursue negotiations, the New
York-based company said in a statement today. The bid was about
14 percent above AstraZeneca’s closing price on April 25.

General Electric Co. gained 0.7 percent to $26.78 after
Chief Executive Officer Jeffrey Immelt met with France’s
President Francois Hollande over the company’s offer for Alstom
SA. Immelt may be moving closer to pulling off his largest-ever
acquisition, even after French officials over the weekend urged
Alstom to consider a rival offer from Germany’s Siemens AG.

The government doesn’t oppose GE’s proposal, and the
meeting in Paris today focused on protecting jobs and
maintaining the independence of France’s nuclear industry,
according to a person with knowledge of the discussions. The
state doesn’t favor either bid, the person said, asking not to
be named as the talks weren’t public.

Newmont, Barrick

NorthStar Realty Finance Corp. soared 7.3 percent to a
record $17.20. American Realty Capital Properties Inc., the
largest owner of single-tenant U.S. buildings, is interested in
acquiring NorthStar for about $20 a share, according to a person
with knowledge of the matter. That’s a premium of 25 percent to
NorthStar’s closing price of $16.03 last week and would value
the New York-based company at about $6.5 billion. American
Realty fell 3 percent to $12.62.

Newmont Mining Corp. dropped 6.7 percent to $24.67. Barrick
Gold Corp. said Newmont ended discussions about a takeover,
which would have combined the world’s two largest gold
producers. Talks between Newmont and Toronto-based Barrick broke
down on April 18 over a disagreement about a proposed spinoff of
some of the combined company’s assets, people familiar with the
situation said the following day.

Bank of America lost 6.3 percent to $14.95. The bank said
it will suspend its planned buybacks and dividend increase
because of an error in its capital planning. The lender will
resubmit its proposal to the Federal Reserve, the Charlotte,
North Carolina-based bank said in a statement. The company said
it incorrectly adjusted for cumulative realized losses on
structured notes issued by Merrill Lynch.